Answer : In short, most likely yes. Practice Management; Practice Transitions; Tax consequences of buying or selling a dental practice. Selling a dental practice today is much different than it was years ago. Just because most dentists sell their practice all at once for a lump sum of money, doesn’t mean it’s the best way.  It’s certainly the easiest way, but with a little education and support from appropriate professionals, a creatively structured sale can reduce your taxes, give you a steady cash flow in retirement, increase your wealth, and provide a legacy to your children. Since the practice is an asset and the sale of an asset is a taxable event, you will owe taxes based on any gain from the sale of the practice. The sale of a dental practice can quickly bump a seller into a steep tax bracket. The sale of different assets produces different types of income so the allocation of the sales price can directly affect the seller’s taxes. Understand the Tax Consequences of Selling a Dental Practice. This is the type of tax most people are familiar with. Today in our last article we look at how to structure the sale of the dental practice transition. No selling dentists want to be caught paying too much in taxes when they sell their practices. Tax strategies when selling your practice. 4. The following example demonstrates the HST implications of an optometrist selling assets of his/her practice to another optometrist. Selling a dental practice has many moving parts, not the least of which is handling taxes. Instead, sellers should consider owner financing some or all of the buyer’s practice purchase. Before buying or selling a dental practice, great care and planning should be taken about tax consequences for the allocation of the sale price to the various assets involved in the transaction. The dental supplies will be charged to expense as they are purchased by the practice. Buyer consequences. Let’s crunch some numbers. As seen in DentistryIQ.com, August 21, 2017 By Michael S. Cerow, CPA, principal owner of Cerow and Company CPAs and Don Spiert, Director of Acquisitions at Benevis Practice Services. The taxes owed, if any, are based in the tax year in which the practice is sold and when the proceeds become earned, not paid. General Sales and Use Tax Guidelines. In most dental practice sales, a majority of the purchase price is allocated to goodwill. The longer you own the practice – the longer you pay ordinary income tax. Contact us to discuss the value of your practice and how we can help you transition out of your office at or above market rate. *FREE* shipping on qualifying offers. We are hiring professionals to help support our dental offices. The purchase and sale of any business can be a daunting task. How the Seller Gets Taxed when Buying a Dental Practice. Before buying or selling a dental practice, great care and planning should be taken to consider the tax consequences regarding the allocation of the sale price to the various assets involved in the transaction. Dental Practice Valuations; Preparing To Sell; ... Tax Consequences of Buying and Selling a Practice . Bankers love to make loans to dentists because their average default rate is about 1%.  They are low risk customers.  In a seller finance situation, the seller takes on the same risk a bank would.  If that is still too much risk for the seller, she can protect her investment by taking a security interest in some other asset belonging to the buyer, such as a rental property owned free and clear. Tax ramifications of selling a dental practice: Sole proprietorship, partnership, or corporation (The Expert series for dentists) Sell your practice now when capital gain rates are still low. This rate, for 2018, is the same as the ordinary income tax rate, depending on the filing status. Most dentists report income from the sale of their practice during the same year. 2. Dentists wishing to sell a practice in today's marketplace have a new buyer entity to consider – the dental services organization or DSO. Selling stock creates a taxable event for the seller. This is a great question and one every dentist should consider well before selling their practice. While I can’t think of a better tenant than a dental practice, if for some reason the selling dentist just doesn’t want to continue to own that particular building, she can also take advantage of the IRS Section 1031 like-kind exchange rules.  These will allow her to trade this building for another income producing building while deferring the taxes down the road. One of the many important facets of a dental practice sale is taxes. In contrast, in an asset sale, at least some of the assets will be taxed at ordinary income tax rates. Typically, the group of assets that would be sold between the selling party and buying party would include dental supplies, furniture, fixtures, and equipment used in the practice, patient files, and goodwill of … If you are serious about wanting advice on the sale of your dental practice and your future accounts and tax as a self-employed dental associate then my practice works exclusively with dentists based all over the UK. After the sale of your practice – you’ll benefit from the long-term capital gain rate – which is about. This includes items like furniture, fixtures, equipment, dental supplies, patient files, and goodwill of the current practice. These corporate groups are well-Dentists wishing to sell a practice in today's marketplace have a new buyer entity to consider – the dental services organization or DSO. The implications of the asset sale will depend on the how they allocate the purchase price. This process takes time, requires expert counsel and a reputable buyer with both the articles and expertise to maintain and grow your practice into the future. Obviously, this varies depending on the amount, age, and type of equipment in the practice. The sale of equipment has the potential to generate some capital gain income but often generates primarily ordinary income from the recapture of depreciation taken in prior years. Your tax advisor will be able to look at the options of maximizing Sec. Please feel free to call me on 01844 260111. Creative thinking also exposes other tax opportunities when selling a practice. Let’s look at ordinary income first. When one of our dental clients approaches us about buying or selling a dental practice they often ask if they should do it as an asset deal or share deal. After the sale of your practice – you’ll benefit from the long-term capital gain rate – which is about one half of ordinary income tax rates. What are the tax implications of selling a dental practice? Establish a profit-sharing plan for your practice. As a tax practitioner for more than 40 years and a business valuation professional for 25 years, sales and valuations of tax practices have crossed my desk numerous times, in addition to making two acquisitions myself. 1601 Response Rd, Suite 110 Sacramento, CA 95815, 711 Jefferson Street, Suite 103 Fairfield, CA 95815, Tax Relief for Victims of California Wildfires, Important Information for PPP Loan Recipients. Your tax advisor must understand your needs and goals in order to apply specific tax planning in your transaction. Filing a sales and use tax return is required for practices that partake in the following transactions: Largest financial transaction they’ll enter into to consider – the longer you own practice... 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